Crude oil futures weekly recap, May 12 – May 16

Crude oil futures logged sizable gains this week, as the crisis in Ukraine bolstered risk premium ahead of the presidential elections next Sunday. Elsewhere, US supplies showed mixed signs, with gasoline demand growing and crude gaining in inventories. Economic data from top oil consumer US was also mixed, but relatively upbeat.

West Texas Intermediate futures for delivery in June closed for $102.02 per barrel on Friday in New York. The contract added 0.51% for the day and registered a weekly increase of 2.02%, as Ukraine supported, in addition to gasoline demand picking up pace in the US. Weekly intraday high and low stood at, respectively, $102.65 per barrel on Wednesday, as US investors weighed supply data, and $99.93 on Monday.

On the ICE in London, Brent futures for settlement in June closed for $109.75 per barrel, to add 0.61% for the day and settle for a weekly gain of 2.30%. Weekly high and low were at, respectively, $110.05 per barrel on Friday, as traders preferred to hedge risks for the weekend, and $107.25 on Monday. Brent’s premium to July WTI was at $8.17 as trading for the week closed.

Ukraine

Kiev began talks with political and civic leaders in an attempt to devise a way out of the crisis, which has dominated the geopolitical scene for the past months. However, separatist militia were not represented. Acting Ukrainian President Olexandr Turchynov said Kiev was prepared to listen to rebels, but they must lay down their arms first.

The talks are part of the Organisation for Security and Co-operation in Europe’s “roadmap” out of the crisis and an attempt to defuse tensions before the presidential elections on May 25th. The US threatened more sanctions if “Russia or its proxies” try to ruin the vote.

“In the run up to the elections next week the tensions will continue,” said for Bloomberg Eugen Weinberg, head of commodities research at Commerzbank AG in Frankfurt. “Even after the presidential elections it’s unlikely to calm down. So this factor of instability is likely to stay.”

Previously, Donetsk and Luhansk regions declared independence, following the referendum last Sunday. Separatist leaders said all Ukrainian troops in the provinces will be regarded as “occupying” forces. The Kremlin said it expects the “will of the people be implemented,” though has yet to comment on the rebels’ requests for Moscow to incorporate the regions in the Russian Federation.

US supplies

The government report on US oil inventories for the week ended May 9th revealed commercial stockpiles of crude oil had increased to 398.5 million barrels, recording a growth of 0.947 million barrels. The gain exceeded expectations of modest gains, and is in line with earlier data by the private American Petroleum Institute (API), which logged at a 0.912 million barrel increase. The rise comes after a 1.781 million barrel decrease last week. Domestic production for the week averaged 8.428 barrels daily, 78 000 bpd on last week’s figure. Meanwhile, imports grew with 242 000 barrels per day to score 7.127 mbd.

Crude oil in storage at Cushing, the delivery point for WTI, fell by another 0.6 million barrels to 23.4 million. Hubs at the Gulf Coast added 2.3 million to stand at 215.7 million barrels.

Motor gasoline stocks have decreased by 0.772 million barrels, well above API’s reported 2.020 million decline, though below expectations of modest gains. Last week gasoline supplies had increased by 1.608 million barrels. Distillates stocks lost 1.124 million barrels, adding on last week’s 0.447 million barrel slip. Refinery utilization rate stood at 88.8% after 90.2% for the previous reported week. Gasoline production averaged 9.606 million barrels daily, gaining 0.614 mbd on the previous reading, while distillates were produced at a rate of 4.911 million barrels daily, slowing by 0.128 mbd.

“The fate of U.S. crude to the upside is in the hands of gasoline. When we look at RBOB, we see a market that is much closer to being a sell than to be a buy,” said for Reuters Walter Zimmermann, chief technical analyst at United-ICAP.

Economic data

The US accounts for more than 20% of total oil consumption, and the health of the economy dominates demand prospects for oil. This week saw mixed economic data from the US.

A number of reports lifted positive outlooks. Housing data, jobless claims and consumer inflation all marked better than expected, some recording historic highs.

Housing data from a report yesterday revealed building permits in the US increased 8.0% on a monthly basis in April to mark the highest figure since July 2008, while housing starts grew by 13.2% and settle at a six-month peak.

Annual CPI was logged at 2.0% for the month of April, while Core CPI was at 1.8%. Monthly figures were at 0.3% for CPI and 0.2% for the core. CPI is a main component of inflation, which is a dominant economic gauge.

Elsewhere in the economy, US continuing jobless claims for the week through May 10th stood at 2.667 million, down 9 000. Initial claims were at 297 000, falling from last week’s 321 000, and recording the lowest level since 2007.

The New York Empire State Fed Manufacturing Index recorded 19.01 for May, thrashing expectations of a 5.0 figure and rocketing up from April’s 1.29. Philadelphia’s Fed index also exceeded forecasts to log at 15.4. The indices are leading business conditions indicators.

In the other spectrum of sentiments, industrial production and retail sales scored worse than expected.

US industrial production for April was logged to have fallen by 0.6%, behind expectations of levelled growth.

Previously, retail sales for April increased by 0.1% on a monthly basis after a 1.5% growth in March, while core retail sales were unchanged for the month, following the 1.0% expansion in March.

Elsewhere, China, which consumes 11% of the oil in the world, logged slight slowdown in investments, retail sales and industrial production for April. Industrial output grew by an annualized 8.7% after 8.8% for March. Consumer purchases have grown by 11.9% from a year before, down from a 12.2% annual increase in March. Fixed asset investments grew by an annualized 17.3%, after 17.6% in March.

In the EU, where about 10% of all oil is consumed, CPI and GDP growth were reported. Germany posted preliminary data for Q1 of 2014, according to which GDP had grown 0.8% on a quarterly basis and 2.5% annually, beating forecasts and exceeding previous results to score highest since early 2011. However, the Eurozone reported an annual CPI of 0.7% for April and 0.2% on a monthly basis, prompting a retreat for the euro in anticipation of easing, as indicated by ECB President Mario Draghi. Additionally, weak GDP growth results from France, the Eurozone’s second economy, the Netherlands and Italy offset the positive outlooks from the Bloc’s top economy.

Technical view

According to Binary Tribune’s analysis for Monday, in case West Texas Intermediate June future breaches the first resistance level at $102.37, it probably will continue up to test $102.72. Should the second key resistance be broken, the US benchmark will most likely attempt to advance to $103.21.

If the contract manages to breach the first key support at $101.53, it will probably continue to drop and test $101.04. With this second key support broken, the movement to the downside will probably continue to $100.69.

Meanwhile, July Brent will see its first resistance level at $110.24. If breached, it will probably rise and probe $110.73. In case the second key resistance is broken, the European crude benchmark will probably attempt to advance to $111.41.

If Brent manages to penetrate the first key support at $109.07, it will likely continue down to test $108.39. With the second support broken, downside movement may extend to $107.90 per barrel.